EIOPA launched a consultation on its advice on the harmonization of national insurance guarantee schemes across the member states of EU. The consultation paper is a draft response to the call for advice by EC on insurance guarantee schemes. The consultation period ends on October 18, 2019.
EIOPA received, on February 11, 2019, the EC call for advice on the review of Directive 2009/138/EC2 (Solvency II). The call for advice covered a broad variety of topics, including all topics that EIOPA has started to work on such as insurance guarantee schemes and macro-prudential policy in insurance. EIOPA will respond to the call for advice in the form of a Solvency II Review Opinion, which will include a holistic impact assessment. The Solvency II Review Opinion will be published for consultation in the fourth quarter of 2019. The advice in this paper will be amended with the input of this consultation process and be included in the Solvency II Review Opinion, which will be submitted to EC.
The draft advice addresses the following areas of an insurance guarantee scheme:
- Role and functioning—Insurance guarantee schemes should be set up with the primary aim to protect policyholders, such as to pay compensation swiftly to policyholders for their losses in case an insurer becomes insolvent and/or to ensure the continuation of insurance policies
- Geographical coverage—Insurance guarantee schemes should be harmonized in accordance with the home-country principle
- Eligible policies—Insurance guarantee schemes should cover a specific range of life and non-life policies, such as policies where the failure of an insurer could lead to considerable financial or social hardship for policyholders and/or in case of lines of business with a high market share in cross-border business in Europe
- Eligible claimants—Insurance guarantee schemes should cover natural persons as well as micro- and small-size legal entities
- Coverage level—Insurance guarantee schemes should have a harmonized minimum coverage level
- Funding—Insurance guarantee schemes should have adequate funding systems in place; they should, for instance, be funded on an ex-ante basis and, if needed, complemented by ex-post funding
- Disclosure—There should be requirements for adequate, clear, and comprehensive disclosure about the insurance guarantee schemes protection to consumers and policyholders
- Cross-border cooperation and coordination—Respective arrangements between national Insurance guarantee schemes should be in place
Overall, EIOPA is of the view that every member state should have a national guarantee scheme in place for the protection of policyholders in the event of a failure of an insurer, which should meet a minimum set of harmonized features. Therefore, EIOPA calls for the establishment of a European network of national insurance guarantee schemes, which are sufficiently harmonized and adequately funded. Additionally, the proportionality principle should be taken into consideration to avoid excessive burdens on insurers and member states. In this context, a flexible approach for the legal structure and setup of the schemes is important. EIOPA advises to conduct a review at least every five years, after the harmonized framework becomes effective.
Comment Due Date: October 18, 2019
Keywords: Europe, EU, Insurance, Solvency II, Insurance Guarantee Schemes, Macro-Prudential Policy, Solvency II Review, EIOPA
Previous ArticleEBA Single Rulebook Q&A: Second Update for July 2019
APRA issued a letter to authorized deposit-taking institutions announcing its intent to formalize the capital measures and reporting requirements for COVID-19 loans through temporary legislative instruments.
EBA is inviting relevant stakeholders, such as financial institutions and information and communication technology (ICT) third-party providers, to share their views and experience on the use of regtech solutions through its regtech industry survey.
FCA finalized the guidance extending measures to help customers that hold insurance and premium finance products and are in temporary financial difficulty because of COVID-19 crisis.
BoE published a statistical notice (Notice 2020/9) explaining the approach for treatment of payment holidays on the profit and loss return or Form PL.
FASB announced the launch of its new Post-Implementation Review (PIR) web portal.
EBA revised the draft implementing technical standards on supervisory reporting as part of the reporting framework 3.0.
ECB published report that presents a summary of the analysis conducted on the internal capital adequacy assessment process (ICAAP) practices of a sample of 37 "significant" banks.
EC published a proposal for a regulation that amends the Benchmarks Regulation (2016/1011) regarding the exemption of certain third-country foreign-exchange benchmarks and the designation of replacement benchmarks for certain benchmarks in cessation.
PRA published a letter from Mel Beaman, the Director for UK Deposit Takers, to suspend the relevant guidance levels on fixed rate lending limits in the “Specialist Sourcebook” for an initial period of six months, running from August 01, 2020 to January 31, 2021.
BoE updated the known issues document for the statistical reporting Forms AS and FV.